The Film Enterprise Value Assessment Based On Real Option Theory

ABSTRACT:With continued growth of national economy and support from various policies about culture industry, film industry develops rapidly and expands largely. Nowadays, for greater development, film enterprises set about listing to finance, merging and recombining, seeking risk investment, etc. A series of economic activities have come forth. How to assess the value of film enterprises objectively and precisely has became the focus of the economic field. The film industry belongs to cultural creativity industries. Compared with the traditional enterprises, the film enterprises’ value is of high uncertainty. Fortunately, we find that the real option theory has incomparable advantages in the appraisal of the value on uncertainty. Therefore, the real option method is introduced to evaluate the value of film enterprises. And this method is expected to promote the value assessment theory in the actual valuation.The introduction of real option theory in China has more than20years history, and it has been used in many fields abroad. China’s real option research is still in its early stage. This thesis introduces the real option theory and adopts real option method to assess the value of film enterprises. The real option method can avoid the defects of traditional methods, which facilitates policy makers to make arrangements in the light of future market conditions and provides decision-making right to choose. Moreover, this method takes the value of growth opportunities into account, which helps leading to more accurately assess of the film enterprise value.Firstly, this thesis reviewed and summarized the enterprise’s value assessment theories and the real option theory from home and abroad. Secondly, this thesis introduced the characteristics of film enterprises and analyzed the limitations of traditional enterprise value assessment methods. Then it introduced the real option method, and demonstrated the evaluation advantage of the real options method. Specifically, this part analyzed the real options identification process of film enterprise and built the film enterprise valuation model based on the real option. Finally, we used the valuation model combined DCF model and real option theory to value the Huayi Brothers Media Corporation. At last, we find the result is close to the stock price, thus proves the real option method is applicable to assess the value of the film enterprises.